Examination of Witnesses (Questions 240-253)
MR JOHN
SMITH, MR
ETIENNE DE
VILLIERS, MS
ZARIN PATEL
AND MS
CAROLINE THOMSON
18 NOVEMBER 2008
Q240 Chairman: We do our research!
Mr Smith: There are another 59
we would like to send you. I do not have the current edition in
front of me. I have not looked at it, if I am honest. I could
not give you a straight answer now on what the connectivity is.
But that is a good example of where, after Eve and the
cross-stitching magazines were sold, we were quite particular
and prickly internally to ensure that the magazines would regularly
have the connectivity. There was set up and there currently exists
for every single one of the magazines an editorial advisory board
that meets periodically and we have to produce a formal report
which goes to the Trust explaining how that connectivity has been
carried out and that the editorial in all the magazines is carried
out entirely in line with the BBC's editorial values. That has
been done. I cannot give you a specific answer in relation to
your question, but I am happy to do that afterwards.
Q241 Chairman: Could I raise one
other with you. Here we have Delicious published by the
Guardian Media Group. It is their Christmas edition and it has
a picture of a Christmas pudding on the front and it costs £3.30.
Here we have BBC Olive, which was launched almost in direct
competition with Delicious. This is the Christmas edition,
it costs £3.30 and it has a picture of a Christmas pudding
on the front. What was the BBC bringing to the market that was
not already there when it launched Olive?
Mr Smith: None of the four criteria,
to be absolutely clear, says that you cannot do anything in a
market because somebody else is already in it.
Q242 Chairman: It does say that you
should not distort the market. So launching Olive did not
distort the market for Delicious?
Mr Smith: The question is whether
there is any distortion occurring as a result of any unfair assistance
given by the BBC through breach of the fair trading laws. Perhaps
I could just say something, because Olive has been mentioned.
The food sector in magazines is a good example of where at the
time we entered that market there were nine food magazines available
on British newsagent shelves. That was in 2002. Now there are
80. Over the same period, the circulation for food magazines has
more than doubled. What happens when competitors enter a market,
as indeed when we enter a market, is that the market improves
because everybody's product gets better as a result.
Q243 Janet Anderson: Do you think,
therefore, that Time Out and Wanderlust are going
to benefit and their circulations are going to increase because
you have acquired Lonely Planet?
Mr Smith: I could not give that
undertaking because I do not run either of those companies and
do not know what plans they would have in the space. I do not
know what the intentions of either Wanderlust or Time
Out are for the development of their magazine in the future,
or, indeed, what other dynamics are at play for Wanderlust
with the travel world and for Time Out in relation to its
information. They are both great magazines and I read them both.
Q244 Janet Anderson: You cannot claim
that the market as a whole will benefit.
Mr Smith: All I am saying is that
what tends to happen when we enter a magazine sector—and
you can never be sure, of course—is that over time the overall
market tends to increase. If you look at the editorial content
of Wanderlust and Time Out and the proposed Lonely
Planet magazine, they are very, very different. They are
operating in a broadly, loosely travel/information sort of space
but they are very, very different. You can appeal to different
demographics, you can appeal to different types of interest. Some
want a lot more information about the country—which is something
Lonely Planet is very good about—and some
want cheap holidays. People want different things out of magazines,
even if they are in the same sector. It is by no means certain
that when the Lonely Planet magazine does launch it will
be operating in exactly the same space as those two magazines.
Q245 Chairman: It is targeting the
same advertising, is it not?
Mr Smith: I reacted rather badly
when I heard that being said—as I did about the launch date,
because it sounded to me as though there was some deliberate intent.
I cannot see that at all and we have moved the launch date in
deference to that point. I cannot find any evidence of that at
all. Indeed, if anything, the way in which Wanderlust get
their adverts is that they tend to go directly to advertisers,
whereas in the case of BBC magazines, and certainly in the case
of the Lonely Planet magazine, 90% or more of our advertising
is done through agents, so it is a completely different process
anyway.
Ms Thomson: Could I add two things.
First of all, when the Worldwide Board is doing an assessment
of whether it should launch a new magazine, clearly there are
limits because every new product has to fit the Four C's criteria.
It has to have a fit with public purposes, so there is not some
unbounded world where they can just wander in anywhere. Also,
as part of that process, one of the pieces of assessment that
is done is will the magazine be adding to the market. Is there
a direct match, is there crossover between readership? That piece
of analysis is done as part of the process. We have been here
before. Pre John's day, when Worldwide launched its History
Magazine—a very important genre for BBC broadcasting,
history, and now a successful and established magazine—History
Today was very upset about it and thought it was going to
go out of business, and yet here we are, five or six years on,
I am a subscriber to History Today and it is there, it
is a vibrant, great magazine still surviving.
Mr Smith: And its circulation
is more or less the same today as it was six years ago.
Ms Thomson: There is obviously
anxiety but our experience is that it is misplaced.
Q246 Chairman: It is your assurance
to us that when the Lonely Planet magazine appears it will
look very different from Wanderlust.
Mr Smith: Yes.
Q247 Chairman: In the same way or
not as Olive and Delicious.
Mr Smith: It is Christmas puddings.
It is the time of the year, Chairman.
Q248 Chairman: It is pure coincidence.
Ms Thomson: It is not great original
marketing to have a Christmas pudding on the front.
Q249 Paul Farrelly: Before we wrap
up our Lonely Planet section, there is one thing that has puzzled
me from some of the figures that have been given to me. Lonely
Planet we are all familiar with. It has been knocking around for
years. I used to buy Rough Guides, but there is no accounting
for taste. What has puzzled me is that pre-acquisition there was
a £10 million turnover, post acquisition it was mid £20
million, and now it is £50 million.
Ms Patel: They are different time
periods.
Q250 Paul Farrelly: I cannot get
a feel for why Lonely Planet has a turnover which has suddenly
exploded in such a short space of time.
Ms Patel: They are time periods.
Q251 Paul Farrelly: Please could
you explain.
Ms Patel: In total Lonely Planet's
turnover is around £50 million per annum. The figures I gave
you broke down the whole year for Lonely Planet, between the period
pre acquisition, which was three or four months, and the period
post acquisition, which was eight months.
Ms Thomson: The £10 million
figure was only for a three or four month period. That may not
have been clear to you.
Q252 Paul Farrelly: No, it was not.
So it is £35 million.
Ms Patel: We think it is about
£50 million. I apologise for not having the figures right
at my fingertips. In total Lonely Planet's turnover is about £50
million. In the accounts we showed it in two time periods because
of the acquisition. We are not saying that after acquisition its
turnover suddenly doubled; they are just two separate time periods.
Ms Thomson: Could we write to
you with the set of figures.
Q253 Paul Farrelly: Yes, it would
be interesting to have a breakdown of the figures, the last accounts
and the Lehman Brothers' opinion.
Ms Thomson: Could I suggest that
we send you the public figures but also any other breakdown you
need.
Chairman: The Committee may have a number
of questions. I think you will be relieved to hear that we might
put those in writing. May I thank you for waiting for so long
and for answering our questions. We may return to you.
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